COMMISSIONER OF INCOME TAX vs. STARLIGHT SILK MILLS PVT LTD

ITR/326/1993HC GujaratGJHC24021334199303 August 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI7 pages
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What were the facts?

The assessee, Starlight Silk Mills Pvt Ltd, claimed investment allowance under Section 32A of the Income-tax Act, 1961, for the Assessment Year 1982-83 on new machinery installed, costing Rs. 86,37,475. This included two crimping machines, an air conditioning plant, electric installations, a transformer, a platform scale, a pump set, and a cleaner. The Assessing Officer disallowed investment allowance on the air conditioning plant, electric installations, and transformer, reasoning that these constituted separate, self-contained units not directly part of the integrated machinery for manufacturing art silk. The assessee appealed to the CIT(Appeals), who allowed the claim. The Revenue appealed to the Income-tax Appellate Tribunal, which dismissed the appeal, confirming the CIT(A)'s order. The Revenue then filed a reference to the High Court.

What did the High Court hold?

The High Court held that the Tribunal was justified in confirming the order of the CIT(A) allowing investment allowance on the electric installation, transformer, and A.C. Plant. The Court noted that the Assessing Officer did not dispute that these items were plant and machinery. The crucial question was whether they were used for the purpose of the assessee's business. There was a concurrent finding by the CIT(A) and the Tribunal that these items constituted an integrated plant and were not independently operable. The Revenue did not argue that any of the prohibitions in the proviso to Section 32A(1) applied, nor that the necessary reserve was not created. The concurrent finding that these items formed part of a consolidated manufacturing plant remained undisturbed, and the Revenue had not presented material to dislodge it. Therefore, there was no infirmity in the Tribunal's order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the order of the CIT(A) allowing investment allowance on the electric installation, transformer, and A.C. Plant? (Question of law) Assessee's Contention: The assessee argued that all machineries and plant were integrated into a single composite unit without which no production was possible. Each item, de hors the other machinery, could not be operated for the business. The entire plant constituted a single integrated unit for manufacturing. Revenue's Contention: The Revenue contended that the Tribunal erred in not restoring the Assessing Officer's order. It argued that all plant and machinery on which investment allowance is claimed must be wholly used for the purpose of business as required by Section 32A, meaning directly used for manufacture. The approach of the CIT(A) and the Tribunal was incorrect, and their order should be reversed.

Which sections of the Income-tax Act were involved?

Section 32A

AI-generated summary — verify with the full judgment below

ITR/326/1993 1/7 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.326 of 1993 For Approval and Signature: HON'BLE MR.JUSTICE D.A.MEHTA HON'BLE MS.JUSTICE H.N.DEVANI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus STARLIGHT SILK MILLS PVT LTD - Respondent(s) ========================================================= Appearance : MRS MM BHATT for Applicant No(s).: 1. MR MANISH J SHAH for Respondent No(s).: 1. ========================================================= CORAM : HON'BLE MR.JUSTICE D.A.MEHTA and HON'BLE MS.JUSTICE H.N.DEVANI Date : 03/08/2005 ORAL JUDGMENT (Per : HON'BLE MR.JUSTICE D.A.MEHTA)

1.

The Income-tax Appellate Tribunal,

The order continues below.

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